Pilgrim’s, JBS Say No Operational Changes Expected

Andrew Jenner
Virginia Correspondent

HARRISONBURG, Va. — After last week’s confirmation that Brazilian meat company JBS S.A. plans to acquire Pilgrim’s Pride, local growers reacted with concern over how the change could affect them, and optimism that the move would strengthen the financially-troubled poultry company.

The sale — which awaits shareholder, bankruptcy court and regulatory approval — is part of Pilgrim’s Pride’s restructuring plan, which the company says will allow it to emerge from Chapter 11 bankruptcy by the end of December.

Mike Weaver, a Pilgrim’s Pride grower from Fort Seybert, W.Va. and the president of the Contract Poultry Growers Association of the Virginias, said the pending sale has been a major discussion item among members of the growers association for the past several weeks.

“We’re cautiously optimistic,” said Weaver, who said that growers have received little information about the deal beyond a press release and grower letter available on the Pilgrim’s Pride Web site.

Weaver has tried to educate himself about JBS by contacting people knowledgeable about the company’s 2007 acquisition of Swift & Company, a large Colorado-based beef producer. He said the things he’s learned so far have been encouraging, and that he doesn’t expect drastic operational changes in the aftermath of the sale.

Cathy Alger, a Pilgrim’s Pride grower from Stanley, Va., said she was concerned about the effect that foreign ownership might have on the company after reading about the rumored sale in a local newspaper. Since then, Alger said, the few things she’s learned about JBS and its other American operations have left her feeling more optimistic. Alger also said she’s encouraged by the news that Pilgrim’s Pride expects to exit bankruptcy protection by the end of December.

Still, the announced sale of Pilgrim’s Pride to a larger, even farther-flung company continues a trend that troubles some local growers.

“I’m concerned about continuing consolidation in the industry,” said Rick Showalter, who raises broilers for George’s and has been a poultry grower for nearly 20 years. “The bigger [the companies] get, the less profitable it gets for the contract growers.”

Showalter emphasized that he was speaking about industry-wide trends rather than one specific integrator. Because JBS has no current poultry operations, its acquisition of Pilgrim’s doesn’t represent consolidation among integrators; nevertheless, the Brazilian firm will replace Tyson Foods as the world’s largest meat producer once the sale is complete, with an annual revenue forecast of $28.7 billion, according to an AP report.

If the sale to JBS, headquartered in Sao Paulo, Brazil, is approved, it would be the first time a foreign company has owned a major poultry integrator in Virginia, according to Virginia Poultry Federation President Hobey Bauhan.

That prospect adds an additional layer of complexity to the whole deal, said Jim Pease, a professor of agricultural and applied economics at Virginia Tech.

Pease said that the economic challenges facing the region’s poultry industry – including higher feed and labor costs than elsewhere, plus the potential for new compliance costs with environmental regulations – are cause for specific concern.

“I’m afraid that could accelerate the demise of concentrated animal feeding operations in this region,” said Pease, adding that a poultry company headquartered overseas might be more likely to relocate its operations rather than fight against rising production costs in the mid-Atlantic.

Both Pilgrim’s Pride and JBS, however, said the acquisition is expected to have little effect on the poultry complexes in Virginia and West Virginia.

In an email, Pilgrim’s Pride Director of Corporate Communications Ray Atkinson said his company expects “there to be no significant impact to our contract growers or the majority of our employees” following the sale. Atkinson also said that JBS would retain most of Pilgrim’s Pride’s senior management, that there are no plans at this time to close any more Pilgrim’s processing plants, and that the deal may actually allow some idled plants to return to production.

Chandler Keys, a spokesman for JBS, said the company currently plans to operate the Pilgrim’s Pride poultry complexes at full capacity, though he said that some decisions can’t be made until after JBS assumes ownership of Pilgrim’s Pride. After previous acquisitions, Keys said, JBS has always maximized the capacity of its new facilities.

Keys said JBS has yet to contact Pilgrim’s Pride growers or employees because now is too early in the process. He didn’t know whether JBS would continue to produce poultry under the Pilgrim’s Pride brand and logo.

“We have a history of working well with producers, and we’ll continue that,” Keys said.

Pilgrim’s Pride employs around 2,700 people at its complexes in Moorefield, W.Va. and Rockingham County, Va., said Atkinson. About 400 growers in the region are contracted with the company.